UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
March 16, 2004
(Date of earliest event reported)
SMITH & WESSON HOLDING CORPORATION
(Exact Name of Registrant as Specified in Charter)
NEVADA
(State or Other Jurisdiction of Incorporation)
| 001-31552 | 87-0543688 | |
| (Commission File Number) | (IRS Employer Identification Number) |
2100 ROOSEVELT AVENUE
SPRINGFIELD, MASSACHUSETTS
01104
(Address of Principal Executive Offices) (Zip Code)
(800) 331-0852
(Registrant’s telephone number, including area code)
Item 12. Results of Operations and Financial Condition.
The registrant is furnishing this Report on Form 8-K in connection with the disclosure of information, in the form of the textual information from a press release released on March 16, 2004.
The information in this Report on Form 8-K (including the exhibit) is furnished pursuant to Item 12 and shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.
The registrant does not have, and expressly disclaims, any obligation to release publicly any updates or any changes in the registrant’s expectations or any change in events, conditions, or circumstances on which any forward-looking statement is based.
The text included with this Report is available on the registrant’s website located at www.smithandwesson.com, although the registrant reserves the right to discontinue that availability at any time.
Exhibit 99.1 Press Release dated March 16, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SMITH & WESSON HOLDING CORPORATION | ||||
Date: March 16, 2004
|
By: | /s/ Roy Cuny |
||
| Roy Cuny | ||||
| President and Chief Executive Officer | ||||
EXHIBIT 99.1
| FOR IMMEDIATE RELEASE | NEWS RELEASE |
Investor and Media Relations:
Patty Bruner
Christensen
SMITH & WESSON POSTS RESULTS FOR THE THREE AND NINE
MONTHS ENDED JANUARY 31, 2004
INCREASED REVENUES, LOSS FOR QUARTER DUE TO
RESTRUCTURING AND RESTATEMENT COSTS
SPRINGFIELD, MA – (BUSINESS WIRE) – March 16, 2004 – Smith & Wesson Holding Corporation (AMEX:SWB), parent of the legendary 152-year old handgun maker Smith & Wesson Corp., reported net product sales of $27.5 million for the quarter ended January 31, 2004, a 7.6% increase over the quarter ended January 31, 2003. Sales for the nine months ended January 31, 2004 were $85.1 million, an increase of 20.1% over the comparable period in the previous fiscal year. The sales increase is attributable to the strong demand for the Company’s new products, particularly the Model 500 revolver, and successful promotional efforts in the domestic market. Firearms unit sales increased by 14.7% and 24.1% for the three and nine months ended January 31, 2004 compared to the comparable periods in 2003.
The Company also reported a net loss for the quarter ended January 31, 2004 of $1.7 million, or $.06 per share, compared to a profit of $718,545, or $.02 per share, for the quarter ended January 31, 2003. The quarterly loss resulted in a year-to-date loss of $450,696, or $.01 per share. The year-to-date loss compares to a profit of $743,505, or $.03 per share, for the nine months ended January 31, 2003.
The $1.7 million loss resulted entirely from one-time restructuring and severance costs as well as legal and professional fees incurred in the quarter as discussed below. The Company incurred restructuring costs of $1.0 million (approximately $629,000 after-tax, or $.02 per share) relative to the closing of the Scottsdale office, the discontinuation of the Crossings catalog and the discontinuation of the Advanced Technology division. The Company also incurred approximately $1.1 million (approximately $662,000 after-tax, or $.02 per share) in professional fees for the quarter relative to the restatement of the fiscal year 2002 financial statements as well as legal fees associated with the ongoing SEC investigation. In addition, the Company also incurred a one-time charge for severance payments to four officers who resigned in December. The total severance costs related to these officers was approximately $760,000 (approximately $474,000 after-tax, or $.02 per share). The total impact of these one-time charges and professional fees was approximately $2.8 million (approximately $1.8 million after-tax, or $.06 per share). Apart from these one-time charges and professional fees associated with the restatement and the SEC investigation, the Company would have reported a profit of $58,068, or $0.00 per share, for the quarter and $1,314,304, or $0.04 per share, for the nine months.
The Company expects to save approximately $1.6 million (approximately $900,000 after-tax, or $.03 per share) annually in salaries and office expenses from the closing of the Scottsdale corporate headquarters. The Crossings Catalog generated a loss of approximately $920,000 (approximately $530,000 after-tax, or $.02 per share) for the nine months ended January 31, 2004. The Advanced Technology division had a loss of approximately $940,000 (approximately $547,000 on an after-tax basis, or $.02 per share) for the nine months ended January 31, 2004.
Cash and cash equivalents declined by $7.4 million in the nine months ended January 31, 2004. The decrease in cash is attributable to the year-to-date losses for the Crossings catalog and the Advanced Technology division, which totaled approximately $2.1 million on a pre-tax basis. The Company also incurred over $1.8 million in professional fees with respect to the restatement of the fiscal year 2002 financial statements and the ongoing SEC investigation in the nine months ended January 31, 2004. The Company also made a $1.0 million payment on its long-term debt in July 2003. In addition, capital spending has exceeded depreciation by approximately $1.9 million as the Company continues to invest in the core business.
Roy Cuny, President and CEO of Smith & Wesson Holding Corporation commented, “We are excited about our progress and future growth as the company’s core handgun operation is strong with increasing sales and positive margins. Internally, we are focused on increasing customer satisfaction and driving out unnecessary costs through improved manufacturing processes and focused supply chain management strategies. The increase in sales is attributable to the increased demand for the Company’s well-respected revolver product portfolio, enhanced products and new product introductions, as well as the continued growth of the Walther product line. The Company has a high order backlog and the previous three shifts of production has been expanded to six days per week to address the high demand for Smith & Wesson products.” The order backlog at the end of January stood at $18.6 million, 34.8% higher than the $13.8 million backlog at the end of January 2003.
Mr. Cuny added, “The Company’s restructuring actions in the third quarter are focused on driving toward higher levels of operating efficiency through the process of consolidating physical operations and the discontinuance of non-core business activities. The loyal Smith & Wesson customers, including distributors, dealers and end buyers, are proving that the core handgun business presents significant opportunity to profitably grow the Company. We look forward to a long-standing focus on realizing that opportunity for all stakeholders – customers, shareholders and our highly driven employees.”
John Kelly, Chief Financial Officer, stated, “The Company plans to invest approximately $3.0 million of capital through the course of the next few months to further automate processes and drive toward even higher levels of productivity. Our focus is to allocate investment dollars in ways that best position the Company for quickly accretive
operational enhancements. Capital expenditure decisions are based on very strict parameters that drive toward operational excellence.”
About Smith & Wesson
Smith & Wesson Holding Corporation is the parent company of Smith & Wesson Corp., one of the world’s leading producers of quality handguns, law enforcement products and firearm safety and security products. Law enforcement personnel, military personnel, target shooters, hunters, collectors, and firearms enthusiasts throughout the world have used the Company’s products with confidence for more than 150 years. Smith & Wesson Corp. also manufactures and markets Smith & Wesson branded handcuffs and other products utilizing its metal-working expertise. For more information, visit http://www.smith-wesson.com
Safe Harbor Statement
Certain statements contained in this press release may be deemed to be forward-looking statements under federal securities laws, and the Company intends that such forward-looking statements be subject to the safe-harbor created thereby. Such forward-looking statements include statements regarding demand for the Company’s products and the opportunity for growth of the Company. The Company cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by such forward-looking statements. Such factors include the demand for the Company’s products, the Company’s growth opportunities, the ability of the Company to obtain operational enhancements, and other risks detailed from time to time in the Company’s reports filed with the SEC.
SMITH & WESSON HOLDING CORPORATION and Subsidiaries
CONSOLIDATED BALANCE SHEETS
As of:
| January 31, 2004 |
April 30, 2003 |
|||||||
| (Unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 4,787,716 | $ | 12,182,010 | ||||
Marketable securities |
1,625,306 | 1,580,440 | ||||||
Accounts receivable, net |
15,732,626 | 14,908,839 | ||||||
Inventories |
15,087,314 | 15,599,305 | ||||||
Other current assets |
4,834,238 | 8,097,862 | ||||||
Deferred income taxes |
3,522,311 | 3,932,081 | ||||||
Income tax receivable |
218,047 | 175,331 | ||||||
Total current assets |
45,807,558 | 56,475,868 | ||||||
Property, plant and equipment, net |
8,924,874 | 7,135,073 | ||||||
Intangibles, net |
309,153 | 310,333 | ||||||
Collateralized cash deposits |
22,767,414 | 21,513,000 | ||||||
Notes receivable |
1,082,605 | 1,000,000 | ||||||
Deferred income taxes |
10,112,394 | 9,308,893 | ||||||
Other assets |
9,495,867 | 10,789,522 | ||||||
| $ | 98,499,865 | $ | 106,532,689 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | 4,950,859 | $ | 8,009,513 | ||||
Accrued expenses |
10,123,120 | 12,127,323 | ||||||
Accrued payroll |
2,670,921 | 2,996,890 | ||||||
Accrued taxes other than income |
1,694,910 | 1,616,607 | ||||||
Accrued profit sharing |
1,588,237 | 1,620,928 | ||||||
Deferred revenue |
872,563 | 212,787 | ||||||
Current portion of notes payable |
3,094,156 | 92,278 | ||||||
Total current liabilities |
24,994,766 | 26,676,326 | ||||||
Notes payable |
38,905,844 | 42,907,722 | ||||||
Other non-current liabilities |
19,818,747 | 21,918,798 | ||||||
Commitments and contingencies |
— | — | ||||||
Stockholders’ equity: |
||||||||
Common stock |
30,772 | 30,620 | ||||||
Additional paid-in capital |
16,437,349 | 16,247,108 | ||||||
Accumulated (deficit) |
(1,726,057 | ) | (1,275,361 | ) | ||||
Accumulated other comprehensive income |
38,444 | 27,476 | ||||||
Total stockholders’ equity |
14,780,508 | 15,029,843 | ||||||
| $ | 98,499,865 | $ | 106,532,689 | |||||
SMITH & WESSON HOLDING CORPORATION and Subsidiaries
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
AND OTHER COMPREHENSIVE INCOME
| Three months ended |
Nine months ended |
|||||||||||||||
| January 31, | January 31, | January 31, | January 31, | |||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
Net product sales |
$ | 27,454,067 | $ | 25,509,861 | $ | 85,121,081 | $ | 70,881,940 | ||||||||
License revenue |
464,521 | 409,190 | 1,250,525 | 1,121,066 | ||||||||||||
Cost of goods sold |
19,499,459 | 18,834,351 | 59,570,067 | 51,150,283 | ||||||||||||
Cost of services |
229,627 | 67,923 | 287,123 | 131,250 | ||||||||||||
Gross profit |
8,189,502 | 7,016,777 | 26,514,416 | 20,721,473 | ||||||||||||
Operating expenses: |
||||||||||||||||
Research and development, net |
15,789 | 191,270 | 513,552 | 711,544 | ||||||||||||
Selling and marketing |
3,180,184 | 2,834,906 | 9,456,164 | 8,153,051 | ||||||||||||
General and administrative |
6,146,958 | 3,034,081 | 14,047,031 | 9,470,451 | ||||||||||||
Restructuring costs |
1,007,817 | — | 1,007,817 | — | ||||||||||||
Total operating expenses |
10,350,748 | 6,060,257 | 25,024,564 | 18,335,046 | ||||||||||||
Income (loss) from operations |
(2,161,246 | ) | 956,520 | 1,489,852 | 2,386,427 | |||||||||||
Other income/(expense): |
||||||||||||||||
Other income/(expense) |
175,916 | 558,153 | (8,868 | ) | 612,212 | |||||||||||
Interest income |
78,673 | 115,460 | 248,569 | 478,023 | ||||||||||||
Interest expense |
(831,751 | ) | (899,250 | ) | (2,511,063 | ) | (2,696,144 | ) | ||||||||
| (577,162 | ) | (225,637 | ) | (2,271,362 | ) | (1,605,909 | ) | |||||||||
Income (loss) before income taxes |
(2,738,408 | ) | 730,883 | (781,510 | ) | 780,518 | ||||||||||
Income tax (benefit) expense |
(1,031,476 | ) | 12,338 | (330,814 | ) | 37,013 | ||||||||||
Net (loss) income |
$ | (1,706,932 | ) | $ | 718,545 | $ | (450,696 | ) | $ | 743,505 | ||||||
Other comprehensive income: |
||||||||||||||||
Unrealized gain on marketable
securities net of tax |
7,826 | 6,153 | 10,968 | 18,458 | ||||||||||||
Comprehensive income (loss) |
$ | (1,699,106 | ) | $ | 724,698 | $ | (439,728 | ) | $ | 761,963 | ||||||
Weighted average number of common
equivalent shares outstanding,
basic |
30,762,304 | 29,793,539 | 30,685,493 | 29,727,550 | ||||||||||||
Net income (loss) per share, basic |
$ | (0.06 | ) | $ | 0.02 | $ | (0.01 | ) | $ | 0.03 | ||||||
Weighted average number of common
equivalent shares outstanding,
diluted |
30,762,304 | 36,359,655 | 30,685,493 | 36,181,817 | ||||||||||||
Net income (loss) per share, diluted |
$ | (0.06 | ) | $ | 0.02 | $ | (0.01 | ) | $ | 0.02 | ||||||
SMITH & WESSON HOLDING CORPORATION and Subsidiaries
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
For the Nine Months Ended:
| January 31, 2004 |
January 31, 2003 |
|||||||
Cash flows used for operating activities: |
||||||||
Net (loss) income |
$ | (450,696 | ) | $ | 743,505 | |||
Adjustments to reconcile net income to cash used for operating activities: |
||||||||
Amortization and depreciation |
1,131,787 | 607,905 | ||||||
Loss (gain) on sale of assets |
75,008 | (6,380 | ) | |||||
Provision for losses on accounts receivable |
22,700 | 2,500 | ||||||
Provision for excess and obsolete inventory |
148,111 | 181,388 | ||||||
Stock compensation for services |
11,400 | 64,825 | ||||||
Changes in operating assets and liabilities (increase) decrease in assets: |
||||||||
Accounts receivable |
(846,487 | ) | (1,455,316 | ) | ||||
Inventories |
363,880 | 4,290,741 | ||||||
Other current assets |
3,263,624 | (1,505,735 | ) | |||||
Deferred taxes |
(393,731 | ) | — | |||||
Income tax receivable |
(42,716 | ) | 21,037 | |||||
Note receivable |
(82,605 | ) | — | |||||
Other assets |
1,293,655 | (136,600 | ) | |||||
Increase (decrease) in liabilities: |
||||||||
Accounts payable |
(3,058,656 | ) | (1,917,536 | ) | ||||
Accrued payroll |
(325,969 | ) | (367,499 | ) | ||||
Accrued profit sharing |
(32,691 | ) | (38,664 | ) | ||||
Accrued taxes other than income |
78,303 | 4,223 | ||||||
Accrued expenses |
(2,004,201 | ) | (1,029,049 | ) | ||||
Other non-current liabilities |
(2,100,051 | ) | (1,513,290 | ) | ||||
Deferred revenue |
659,776 | (1,395,544 | ) | |||||
Due to Walther USA, LLC, net |
— | (529,353 | ) | |||||
Net cash used for operating activities |
(2,289,559 | ) | (3,978,842 | ) | ||||
Cash flows (used for) investing activities: |
||||||||
Payments to acquire marketable securities |
(33,898 | ) | (535,440 | ) | ||||
Additions to collateralized cash deposits |
(1,254,414 | ) | (957,692 | ) | ||||
Payments to acquire patents |
(14,109 | ) | (67,101 | ) | ||||
Proceeds from sale of property and equipment |
14,799 | 8,760 | ||||||
Payments to acquire property and equipment |
(2,996,106 | ) | (2,831,673 | ) | ||||
Net cash used for investing activities |
(4,283,728 | ) | (4,383,146 | ) | ||||
Cash flows (used for) financing activities: |
||||||||
Payment on notes payable, Tomkins |
(1,000,000 | ) | — | |||||
Payments on loans and notes payable, related parties |
— | (357,425 | ) | |||||
Proceeds from sale of common stock |
133,593 | 76,012 | ||||||
Proceeds from exercise of options to acquire common stock |
45,400 | — | ||||||
Net cash used for financing activities |
(821,007 | ) | (281,413 | ) | ||||
Net decrease in cash and cash equivalents |
(7,394,294 | ) | (8,643,401 | ) | ||||
Cash and cash equivalents, beginning of year |
12,182,010 | 20,012,491 | ||||||
Cash and cash equivalents, end of period |
$ | 4,787,716 | $ | 11,369,090 | ||||